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It’s been well over a year since anything’s been published on this blog. Good to be back!

Justin Wolfers, professor of economics at the University of Michigan, has recently argued that the stock markets react negatively to the possibility of Trump being elected President. And indeed, when the FBI announced today that they were looking into some of Hillary Clinton’s email messages again, stocks fell and volatility measures increased.

It’s worth remembering what the S&P 500 index is to see what the market is actually expecting from Trump:

What would Trump supporters argue here? They could argue that the market is wrong about its expectations, and that it would initially fall but eventually rise if Trump is elected. In that case, they should bet accordingly by buying in the short-term period after Trump is elected (if he is elected). They could do the opposite if he isn’t elected (namely, once the market rises in the short run, start betting against it).

Or they could argue that the market expects nominal GDP to rise relative to trend but S&P 500 earnings as a a percentage of GDP (we’ll call this E/Y) to fall relative to trend. If there were no change in the divisor or in the P/E ratio, then E/Y would have to fall far enough that E would actually fall (relative to what the market would otherwise expect). What would the reasoning here be? They could argue that S&P 500 companies would lose business, but that smaller firms and/or workers would benefit by a greater amount. Perhaps if Trump encouraged better antitrust enforcement, this could happen. It could also happen if he reduced immigration to the point where labor share of GDP increased, but this would probably reduce nominal GDP, so it would become harder for them to argue that nominal GDP would rise relative to trend. (Also, in most models, immigration doesn’t affect labor’s share of GDP in the long run because the capital-to-labor ratio can readjust.)

They could also argue that Trump being elected would reduce the price-to-earnings ratio (we’ll call it P/E). Trump’s proposed tax cuts might be expected to raise P/E by increasing people’s willingness to invest at current stock prices. But if he is expected to run large deficits, the market might expect the deficits to raise interest rates and crowd out private investment, which would presumably lower P/E. Trump could also create policy uncertainty that would discourage investors and reduce P/E, although this doesn’t seem like an argument that Trump supporters would want to use.

They could argue that Trump would somehow increase the divisor I mentioned earlier. Perhaps more S&P firms will issue new shares and dilute their existing ones, although this doesn’t always actually reduce the share prices (since the firms now have more cash). A potential pathway here is that Trump could cut corporate income taxes, making equity financing more favorable compared to debt financing and thereby encouraging companies to sell shares and pay off debt. (Here is one paper arguing that the current tax system encourages debt financing). However, this could also end up raising the P/E ratio, since investors are willing to pay some amount for an increased book value for the firm. So it’s not clear how Trump’s expected policy proposals would affect anything here.

Lastly: Trump supporters could just admit that Trump would reduce expected nominal GDP compared to what it would be under Clinton. This doesn’t destroy their argument for him. They could still claim that Trump would increase American life satisfaction. Or they could argue that electing him would help foreigners. Or they could argue that Trump would raise real GDP compared to trend but reduce nominal GDP compared to trend, although they would have to then admit that this would make managing the federal debt more difficult. This also seems unlikely, because then market expectations of inflation would fall, but they actually just rose slightly (from a 10-year TIPS breakeven rate of 1.71% yesterday to 1.72% today). So Trump supporters who argue this position would have to say that the market expectations are wrong.

So it seems like the following holds:

The market probably expects that nominal GDP will fall relative to trend if Trump is elected

Trump supporters could either agree that this will happen and still defend Trump, or they could argue that the market is wrong and bet against it.

Which will it be?

EDIT: To add some more data to this, the S&P 500 fell from a high of 2140.61 just before the news came out to 2126.41 right now (trading has closed). That’s a 0.66% fall in the S&P 500. On BetFair, there was a 5.6 percentage point decline in Clinton’s odds.:

Professor Wolfers had found an increase of 0.71% in the S&P associated with a 6-point gain for Clinton. So with that ratio, we would expect a 0.66% fall in the S&P 500, which is exactly what we saw.

My view is that betting markets, including conditional ones that can provide information on how markets expect one event to affect the likelihood of another, should be liberalized (and can even provide policymakers with valuable information). I still think that with available data, Trump supporters must face the choice I described in this post.

One claim about liberalized immigration policy is that it will raise the incomes of immigrants and quite possibly natives, but that average incomes of First World countries will fall.

How is this possible? It’s a matter of averaging two groups together. Suppose you have Country A with 100 people each earning $50,000, and Country B with 100 people each earning $10,000. Then, everyone in Country B moves to Country A and earns $30,000 due to their higher labor productivity in Country A. And in this case, Country B’s labor complements Country A’s labor. So the people of Country A see their incomes rise to $60,000. Both groups benefit. But now the average income of Country A has fallen from $50,000 to $45,000, even though every single person is better off. This is an example of Simpson’s paradox.

So there is a political concern that, even if immigration doesn’t harm natives, it could look like it’s harming natives. What’s the solution? One possibility is publishing another set of income figures: not income per person in America, but average income of native-born Americans. (And average household income for households whose heads are natives, and average hourly compensation for native workers; a variety of measures would exist.) This is the “income per natural” idea developed by Michael Clemens and Lant Pritchett of the Center for Global Development.

Is this dishonest? No. The new figures would be published alongside the old ones, not as replacements. And the concepts these figures refer to are relevant: they reflect how well native-born Americans are doing. If people care about the welfare of native-born Americans, surely these numbers matter. Citizenists want to maximize the well-being of native-born Americans, and if they used numbers for all people living in America, they would come to policy conclusions that are not actually optimal for native-born Americans. Clearly that’s a failure for them.

I think natives probably would benefit on net from liberalized immigration, so I think publishing these statistics would politically help supporters of liberalized immigration. But either way, it would help better depict what’s happening to the welfare of natives.

Note the use of the phrase “cultural individualists.” This post regards people who value individualism on a cultural and/or personal level. This is in contrast to libertarianism, which is a political theory that has nothing to say on whether individuals in society should voluntarily organize along the lines of greater emphasis on the individual or on the group/community. Libertarianism only concerns the use of force in society, especially in the context of government, and is founded on individualism only in the methodological sense as it relates to politics (e.g. individuals have rights, and all rights of groups stem from the rights of the individuals composing those groups).

It is should be apparent to people who have invested a few unbiased few minutes thinking about the problem that feminism has a definitional problem disguised as a coup d’état disguised as a PR problem. Let me untangle that knot for you:

Feminism consists of two main camps:

Type 1) A vocal radicalized minority of the sort that writes tirades on Tumblr claiming all men are awful pigs and/or rapists and that everything bad in the world happens due to the (imperial/neoliberal/capitalistic/viciously white) patriarchy.

and

Type 2) A more silent majority that claims “hey, there are (some) cultural ways in which (some) women and (some) men are treated differently (by some people) starting as early as childhood that possibly lead to women failing to realize their full potential personally, professionally, and socially.”

The PR problem is the fact that feminism is widely consider a crazy, radical, man-hating ideology.

The reason for this is a coup d’état of the word “feminism”: Type 1 feminism is crazy and vocal, which means it monopolizes public coverage of feminism (scandal sells) – at least for people who don’t go out of way to read more broadly on feminism. Because Type 1 is very off-putting and has become the de facto face of feminism, the broad public considers it to be the standard bearer for feminism and writes off the whole movement as crazy – including the silent Type 2 majority that doesn’t want to make men suffer or beg for mercy, but simply wants people to put themselves in each other’s shoes.

The reason why this coup d’état was “allowed” [1] is that “feminism” has always been poorly defined. Not only has the word provided a home for the almost diametrically different opinions on gender that we see in Types 1 and 2, but it’s lost its own root (“femin” – woman) in order to become associated with a varied assortment of ideas dear to the cultural left, such as critical race theory, LGTBQUIA rights, animal rights [2], and so on. The possible solutions to the problems that this broadly-defined feminism identifies range from voluntary cultural shifts by engaging in open-minded discourse to forcefully smashing apart the entire global system of commerce. Besides things that are obviously anti-woman, it’s difficult to think of a concept that couldn’t be spun to be some sort of hyphenated feminism [3]. Couple this with the drastically different approaches for building up the theory behind each of these flavors of feminism (ranging from rationalist to relying on personal anecdotes to replace systematically and methodically collected data), and “feminism” quickly loses its meaning.

If someone were to choose to label themselves as feminist, the (commonly assumed) implication is that they place their support behind all the wings of this movement. It’s difficult (if not impossible) for someone to say “I’m a feminist” without this carrying the entire baggage of the feminist movement. This is one of the reasons (if not the primary reason) why I do not consider myself feminist: if I am a feminist, what does it really mean? Who am I claiming to be?

The (Failed) Solution

For feminists to be able to progress, they need to shed all of this baggage and focus entirely on the part of feminism (qua feminism) that makes sense: Type 2 feminism. That is, the leaders of Type 2 feminism have to reclaim the word feminism for themselves and reject Type 1 feminism not only as incorrect, but also as not feminism. And then, whenever a Type 1 feminist makes a statement such as “I support [Type 1 issue] because I’m a feminist,” Type 2 feminists must vocally respond “Sorry, that’s not feminism. Go do that off somewhere else away from the term ‘feminism’ and come up with a new name for it.”

There are two obvious problems with this, however:

1) Type 2 feminists are not doing this. Maybe it’s because they don’t want to start a civil war and lose face in the public discourse. Maybe it’s because they tolerate Type 1s because Type 1s still write their names down under the column “feminist,” giving the movement further strength in numbers – even if this is just adding apples and oranges.

2) Type 1 feminists want to be part of the definition of feminism, because to them it’s very useful to spread their ideas. In his regularly brilliant blog Slate Star Codex, Scott Alexander describes the technique known as “motte and bailey” and how it relates to feminism. Motte and bailey involves a group that, in good times, is out in the open making strong, controversial claims that they say are supported by an ideology, but when that group comes under attack, it retreats to a fortress of claiming that their attackers are attacking the obvious and uncontroversial elements of the ideology. In the context of feminism: In good times (and when in a group of their own), Type 1s make claims like “capitalism institutionalizes oppression for all women” and “rape culture is in the fabric of our society and teaches all men to rape.” When challenged on these assertions, they retreat to the position that claims that the opponents are attacking feminism, and how could they – because all that poor little feminism wants is for men and women to be treated as equals when sitting at the table in society. Hence, Type 1s can hide behind Type 2s when they need defense, thereby claiming that their opponents are crazy misogynists who would deny women a voice. If Type 1s were banished from feminism, they’d have no way to defend their claims by accusing their opponents of being awful human beings who deny women the most basic of rights.

The (Proposed) Solution

It seems, then, that Type 2s either don’t want to engage in this purge or are unable to engage in it. This is unfortunate, since Type 2 feminists probably have something positive to bring to society.

And if (real) feminists can’t reclaim their own term for themselves, perhaps someone else should commandeer it – and in the process redefine its perspective. The obvious candidate is cultural individualists, who want to maximize the power, independence, and self-sufficiency of the individual. The reasons are clear: Type 2 feminist issues are issues of individual autonomy and individual empowerment. To give some examples:

– Women aren’t encouraged as much as men to study math, engineering, and computers from an early age, which steers individual girls away from the fields they like most and toward fields that are more “socially acceptable” for them. Setting aside the question of whether men and women have naturally different aptitudes, it’s undoubtedly the case that regardless of what nature gives men and women, societal pressure and cultural norms can negatively pressure individual decisions in ways that go against the will of these individuals. The issue of gendered education, then, becomes a question of “can individuals, as wondrously varied in abilities, interests, and passions as they are, find fulfillment and maximum growth in their lives, or does society hinder this ability?” Given that cultural individualists love giving individuals free rein in deciding their own futures, they can perfectly well be standard bearers for more equal treatment of men and women in early education. And if even after removing all obstacles we see gender differences, then let it be so (they would say).

– Women are often harassed on the streets with arrogant, unwanted attention. I’m not talking here about someone saying “have a good day, ma’am,” but instead the sort of pickup lines stereotypically associated with construction workers cat calling women. I can just imagine that in a piece of literature by a cultural individualist, these unwanted, repeated, and arrogant come-ons would be symbolically described as a barrier to break through, an obstacle to overcome, a sneering, twisted imp jeering at the character to be banished. Moreover, for a cultural individualist, not only are the cat callers failing to live up to their own potential, but they’re pulling the individual down.

– Women are sometimes passed over for recognition in the workforce. This is related to the point about education. Cultural individualists want people to not only be recognized and glorified, but they also want them to be glorified for the right thing – not merely for external looks, but for the subjects about which individuals are passionate and in which individuals invest a lot of time to succeed.

– Many women are the victims of violence (including rape). It almost goes without saying that cultural individualists, as a byproduct of seeing the individual as the most powerful symbol of humanity, also go on to see the individual’s body as a temple that must not be desecrated.

The list can go on. The pattern is that the issues on which Type 2 feminism focuses are issues that matter because they’re issues that violate individual autonomy and peaceful individual possibilities for growth. To cultural individualists, the goals of sensible feminism make sense not because there is a group of people called women and society is hurting the group. Instead, it’s because the growth of each of those individuals is impaired – the fact that they’re all women doesn’t matter much morally, only strategically: since all of these separate individuals are being held back by a characteristic they all happen to share, the issue can be addressed in a more strategically coherent way.

One interesting byproduct of making feminism be a part of cultural individualism is how this relates to the “I don’t need feminism because […]” movement, which has women writing on a piece of paper why they don’t need feminism (ostensibly because they’re strong individuals and not victims). The response of the feminism that is a subsection of cultural individualism would be “fantastic – God bless you. We want to give all other individuals the chance to be exactly like you guys, and we’d love to have you as mentors or as a person to talk to for people who aren’t like you yet. We exist as a movement so that one day we won’t have to exist. We want more people like you – more people who are powerful enough to not even need a movement (though hopefully people who also help the movement to make more people like you!).” And if one stops to think about it, this really should be the response of feminists to such campaigns. The response should be “we’re thrilled for you. It means you’ve achieved the goal we’re fighting to help every individual to achieve. We couldn’t be happier. Welcome to the team!”

Conclusion

So we see that everything is about framing. If feminism were framed today as an ideology of the individual and his/her power to flourish, to grow, to learn, to build, to create, to form worlds, to shape history, to destroy the old, and to epically usher in the bright, the new, and the useful for all corners of society, its reception would be quite different [4]. It would be a feminism that would ride under the banner of someone like Ayn Rand [5], a feminism that wouldn’t be founded on the despair of the oppressed, but the future of the powerful. And at that point, it wouldn’t even really be feminism – it would be individual power for everyone, because ultimately that’s what cultural individualism is about – empowering the you, the “I”, regardless of the social circumstance or the accident of birth.

Cultural individualists have the opportunity to create this feminism. And perhaps they should. Banish Type 1, and remake Type 2 in the tradition of cultural individualism [6].

___________________

[1] As with the evolution of most words, there has not been a single gatekeeper who has “allowed” the word to take on a meaning

[3] A Type 1 feminist might at this point respond that “see, this means the entire world is against women!”

[4] In rhetoric, sometimes Type 1 feminists also sound somewhat centered around the individual, but there always appears to exist not only a certain hostility underlying all their rhetoric, but also a sense that suppression of individual growth is bad more because it harms the group than because it harms the individual that’s directly affected.

[5] I use the word “like” because I neither know Rand in much depth nor do I support all her views and rhetoric. However, she’s typically associated with cultural individualism, so I’m relying on this stereotype of her.

[6] I’d also like to note that since many libertarians are cultural individualists, they can be part of this solution. Not as libertarians, since libertarianism has nothing to say on which voluntary cultural norms ought to prevail, but rather as cultural individualists. Moreover, they should be careful to clearly separate the two concepts (even if blending them might help them politically).

A lot of social movements call for divestment of the shares of firms which are opposed to their goals. In particular, many colleges and universities have faced student protests demanding that college endowment funds divest from fossil fuel companies. However, they should be concerned about divestment’s actual effects.

If a group decides to sell off its shares of some Company XYZ, the price of the shares will fall. However, nothing has changed about Company XYZ’s expected future cash flows. Therefore, nothing has changed about investors’ valuations of Company XYZ. So when the share price falls, other investors simply get an opportunity to buy the shares for cheap. Net result: no damage to Company XYZ.

Furthermore, by creating this buying opportunity for other investors, what divesting groups are actually doing is transferring wealth to said investors. This usually means transferring wealth to wealthy individuals in the First World.

Of course, one argument could be that divestments act as public statements and make action by others more likely. A Harvard Political Review article argues that this was the case with divestments from South Africa in protest of apartheid: they had little financial effect, but helped raise awareness.

But divestments are public statements that cost money. What if universities instead aimed for high investment returns and donated the difference to efficient charities? (Possibly charities aimed at helping victims of whatever is being protested.) The result would be transferring money to effective causes instead of wealthy investors. And universities could still publicize their donations to charity as a way of raising awareness.

Let me reiterate: the main impact of divestment is that a few wealthy investors benefit, while the offenders are unharmed. Is that really ideal?

The New Republic staff writer Elizabeth Stoker Bruenig recently penned a devastating critique of libertarians, where she argued that the beliefs of self-described libertarians do not square with the central tenet of “freedom” that (allegedly) underlies libertarianism. She links to a wonderful Pew Research Center study, which she uses to base her takedowns and factually demolish libertarians bit. By. Bit.

Here is a play-by-play of her critique:

1) After quoting porn-famous Belle Knox on her move toward libertarianism after a strict Catholic upbringing, Bruenig notes that “Insofar as libertarianism is opposed to almost every feature of Catholic morality, Knox has certainly picked an appropriate politics of rebellion.”

Why this demolished libertarians: Catholicism teaches us to help the poor. Libertarians hate the poor, as evidenced by their desire to almost completely dismantle the safety net. Sure, they might argue government programs are inefficient or fail to stop poverty – but they only say this to cover up their elitist distaste of poor people. The truth is that even if these programs are inefficient, it doesn’t matter, because what they do is they show our commitment – as a society – to recognize the plight of the poor. You can’t put a price on dignity – and we want to restore the dignity of our lower class!

2) Relying on her careful reading of the Pew study, Bruenig concludes that “libertarians themselves do not appear to have a good sense of what libertarianism actually means.” You want evidence? Here is the evidence.

Why this demolished libertarians: According to the Pew study, 14% of Americans identify as libertarians. Furthermore, 11% of all Americans both identify as libertarian and at the same time know what libertarianism is. That means that 11/14 = 78% of people who identify as libertarians actually know what libertarianism means. And what does that mean? It means that more than 1 in 5 self-described libertarians doesn’t understand what libertarianism means!!

People who do not foolishly choose to identify with that political label of teenage rebellion are a different matter. The study notes that 57% of all Americans know what libertarianism means. If we remove the mere 11% of the population that is both libertarian and knows what the label means, that means that 46% of the population is both non-libertarian and knows what the label means. 46/86 = 54% of non-libertarians know what libertarianism is. That is, more than 2.5 out of every 5 self-described non-libertarians know what libertarianism means. And last time I checked 2.5/5 is, well, 2.5 times more than 1/5! If you eat 2000 calories a day, 2.5 times more than that is 5000 calories a day. Can you imagine that?!

3) Bruenig points out that “libertarians polled as far more supportive of police intervention in citizens’ daily lives, showing greater support for stop-and-frisk policies than the general population” [emphasis mine].

Why this demolished libertarians: Bruenig is not afraid to cite her sources, and even shows us a diagram from the study that backs her claim (red elements mine):

Notice that libertarians are a whole 1% more likely to allow police to stop/search all who look like crime suspects. And before libertarians start crying out that 1% “is within margin of error” or some made-up excuse like that (after all, they hate statistics because reality has a strong liberal bias), let me point out that 1% of the US population is more than 3 million people. That’s a lot of people, people!! The data proves it – libertarians, while pretending to be pro-freedom, actually support intervention into our lives far, far more than the general population!

4) Continuing, we learn that “A baffling quarter of libertarians surveyed believe homosexuality should be discouraged.” Do you know what I think should be discouraged? Libertarianism! If you didn’t think they were barbarians before, how can you have any doubt now? Libertarians think that homosexuals (or whatever awful slang word libertarians probably use at home to describe them) are no better than animals.

Why this demolished libertarians: Once again, just look at the source data, and the picture becomes clear: when it comes to hating gays, libertarians are unparalleled:

Notice that 26% of libertarians (even more than Bruenig had humbly cited!) think homosexuality should be “discouraged” – as if our neighbors and family members who are homosexual just “choose” to be gay and to be ostracized by society. Let me remind you, people, 26% is an enormous number!

How do non-libertarians compare? We just need to solve the equation 0.11*26 + x*89 = 31. Solving it, x=31.6, which means 31.6% of non-libertarians favor discouraging homosexuality. That means that almost 69% of non-libertarians are against discouraging homosexuality! If you need me to do the math for you, libertAynrians, the number 69 is more than 2.5 times bigger than 26! We see that 2.5 pop up again. Weird, huh?

5) Of course, Bruenig, being a master writer, also interweaves humor into her narrative: “Knox is only 19 years old, so we can hardly fault her for these contradictions.”

Why this demolished libertarians: Don’t you get it? Only teenagers could be libertarians, because teenagers are so immature and don’t know what the real world is like! Libertarians harbor ideas so far out of touch with reality, that even though they pretend to love “economics”, no libertarian (or person supporting any libertarian ideas) could ever win any legitimate prize in economics like the Nobel Prize.

6) She just keeps going for Belle: “For Belle Knox, freedom has to do with decriminalized sex work and fair pathways for women in employment—but both of those projects imply a level of proactive government regulation in business.”

Why this demolished libertarians: Can’t libertarians get it? Decriminalization of sex work means that we will need to regulate it. It’s obvious that, therefore, libertarians support a policy that would add regulation to the market: We’d go from a laissez-faire, completely unregulated and uncontrolled ban on sex work that requires no government intervention to a legalized industry with some regulations!

7) Bruenig calls the libertarians polled “jingoistic” – and once again her source backs her. When we look at the real, objective data, only 46% of libertarians think US involvement makes world problems worse, while the corresponding number for the entire US population is significantly higher: 40%!

Why this demolished libertarians: 54% of libertarians don’t think US involvement makes world problems worse. 40% of the general population understands that US involvement makes things worse. Would you rather be with 54 warmongers or 40 peaceful people? I thought so.

8) She just keeps going: “Libertarians who oppose government aid to the poor seem to desire freedom from taxes, but have no interest in whether or not the poorest are really free to exercise their rights to human flourishing when they can barely eat.”

Why this demolished libertarians: Read my lips: If you oppose the current welfare system, you think all poor people should die. Period.

9) Bruenig finishes the article off by telling us that “for genuine, invested activists like Knox, the evasiveness of the libertarian message should be a red flag.” A wise warning indeed.

Why this demolished libertarians: Belle is a teenager, and teenagers are stupid, so we know she’s genuine and invested. But other libertarians are not excused.

I was thinking earlier today about the effect of immigration on interest rates. In particular, I thought of an unusual argument for immigration restrictions when short-run interest rates are at the zero lower bound.

Some New Keynesian economists have suggested that destroying productive capacity can raise current output in said circumstances. (For academic journal articles asserting this, see the beginning of this paper by Johannes Wiedland, also cited below.)

The reasoning is that a negative supply shock can lower expected production, thereby increasing expected inflation. When short-term nominal interest rates are stuck at zero, this has the effect of lowering expected real interest rates. This in turn causes people to spend more money now, raising output and employment.

Intuitive example: You have money in a bank account earning nearly zero interest. A hurricane forms, threatening the supply of various goods. What do you do? Simple: you take money out of the account and buy goods whose prices you expect to go up. The opportunity cost of doing so is minimal, and buying the goods before they go up in price makes you better off.

Paul Krugman’s example of an “alien invasion”: Nobel laureate economist Paul Krugman gave an infamous example of an attack by aliens on Earth, in which governments would scramble to spend money on defense. This example is a bit different from the one I gave, because the spending is done for the purpose of fighting off a potential supply shock, rather than just reacting to one.

However, in the case of the alien invasion, there is an expected possibility of aliens doing damage to the earth, and some diversion of resources towards fighting aliens instead of producing other goods. Both of these raise inflation expectations, lower real interest rate expectations, and increase present-day spending.

What does this have to do with immigration? When the economy is at the zero lower bound, it could make sense (under the model previously described) to further restrict immigration. This reduces expectations of real GDP, thereby increasing inflation expectations and inducing more spending.

Indeed, some people have referred to the existence of an “illegal alien invasion” (Google the term for examples); namely, of people entering the United States unlawfully. (Put aside the question of whether it is accurate to call mostly-peaceful migration an “invasion”.) But, unlike Krugman’s, this “alien invasion” would lower current output! With more immigrants adding to future real GDP, and short-term nominal interest rates stuck at zero, people would expect that goods will be cheaper in the future than they previously thought, and would hoard more money as a response.

A few reasons why I don’t actually endorse this argument for immigration restrictions:

Even accepting the described view on supply shocks, one might not want to trade off future production for present production. Krugman was joking with his suggestion of faking an alien invasion, and it’s unfair to say that people who endorse this model don’t care about the long term at all.

There are empirical issues with the claim that negative supply shocks at the zero lower bound are expansionary. Johannes Wieland of UC Berkeley argues in the previously linked paper “Are Negative Supply Shocks Expansionary at the Zero Lower Bound?” that “financial frictions” prevent this effect from working. He claims that negative supply shocks reduce the value of banks’ balance sheets, thereby constraining their lending and preventing the positive effect on aggregate demand from taking place. Using a general equilibrium model with these “financial frictions” built in, he finds that negative supply shocks at the zero lower bound do hurt short-run output. More research here may be needed, but his case seems plausible.

There are better ways of dealing with the zero lower bound. I don’t want to get into my views on monetary policy here, but it should suffice to say that most people across the various schools of thought find there to be better ways of getting out of the zero lower bound than deliberately destroying productive capacity.

Immigration could raise returns on capital and investment demand, thereby raising interest rates. Generally speaking, expanding the supply of labor is expected to raise the return on capital by acting as a complementary good. However, I say “could”, because the complementarity between labor and capital is very complex, and there are cases in which immigrants act as substitutes for capital. Dartmouth economist Ethan Lewis has done some work on this subject; see, for instance, “Immigration and Production Technology”.

I can’t say I find the “restrict immigration more at the zero lower bound” argument persuasive, but it is at least interesting, and I think I am the first to suggest it.

Here I will use “conservative” loosely to refer to the general “personal responsibility” and “pulling yourself up by your bootstraps” attitudes the American right might generally support.

My foray into privilege theory has led me to ask myself what some of its implications for direct action are. That is, given what we know about privilege, and assuming that we care about people who are underprivileged, what should we do about it?

We begin again with the framework of privilege I discuss in my “Formalizing Privilege” article: that privilege is the combination of genetic and environmental factors that cause one’s success/satisfaction/power in life. Using this definition, we ask ourselves what we can do to alleviate the plight of the underprivileged. This article is not meant to be the end of this conversation, but merely an observation that might have otherwise gone unnoticed.

One of the central questions in this discussion is which privilege is the “most important one.” One way we can study this topic, as with everything else in science, is to vary a single variable while holding all other ones fixed. That is, we vary one privilege and we fix all others and observe the outcome. For example, if we’re interested in how important race is (on the margin), we take people who are identical in all ways except for in their race and we see how their lives turn out.

This analysis is difficult to perform because we generally do not have people who are identical except for one characteristic, and the origins of various privileges can be very difficult to notice (and are often unobservable, especially given our current data sets). Still, I wish to present one case study and discuss its implications: that of Ben Carson, as I learned about him from the book Gifted Hands. I hope that the shortcomings of extrapolating from this data set of size one are kept starkly in mind, while the important lessons are also taken to heart.

Ben Carson grew up fairly underprivileged:

– He was a black child in Detroit

– His mother raised him and his brother (sometimes on three low-paying jobs) without his father, while at times away for psychiatric treatment

– His mother had married at 13 and had no more than a third grade education.

– His school environment was not conducive to growth and self-empowerment

– He was teased by his white classmates (and sometimes his teachers) and he at one point believed he was not smart enough to do well in school

I initially had chosen the phrase “as underprivileged as they come” to describe him, though in the spirit of accuracy I decided not to use it, since it’s probably always possible to be less privileged. Still, it comes close.

We know what ended up happening to Carson: he became one of the world’s leading neurosurgeons, and he was a pioneer in new types of brain surgeries. Given all his underprivileges, what gives?

It’s possible to attribute all of this to chance – Carson just happened to be lucky and all the steps that led to his eventual success were a stroke of luck. This is theoretically possible, but I don’t find it particularly compelling.

The other explanation is that he was able to overcome the negative aspects of his environment through the positive ones – most notably, his mother’s influence. His mother instilled in him the values of hard work and determination and always pushed him to give his best. I would give a longer description of all of the values she stressed, but it would likely be variations on the main theme of hard work, so I won’t insult the reader’s intelligence by trying to influence him or her by repetition. Instead, let’s look at what conclusions we can draw.

It appears, at least in this case, that the values instilled in a person are so strong that they may very well overpower all other external underprivileges (which in Carson’s case were many – being a poor, black kid in Detroit under a single mother who had psychiatric problems and had to raise two children). Naturally, it’s unreasonable to expect that all kids who have these influences can become as successful as Ben Carson. But Carson’s story is an interesting case study where we have a mix of severe underprivileges that are counteracted by the value of hard work.

The “policy” recommendation here becomes apparent: teach kids “conservative” values that are traditionally associated with the American right: work hard, keep your course, study in school, be responsible, and pull yourself up by your bootstraps. This can be implemented either culturally (through a shift in what individuals in society choose to teach their children) or governmentally (through government edicts to emphasize hard work and personal responsibility in school and propaganda to do the same outside of school).

What I’ve done here is Type 2 privilege checking, as defined in my original article, which seeks to understand causal pathways in society that lead to people’s success. That is, I checked Dr. Carson’s privilege to see how other people could emulate him, and his story is a testament to conservative values. Do I believe that these should become government policy? No – I don’t favor social manipulation by the government of any kind, though I personally find the ethic of hard work to be empowering myself. I merely point out the conclusion from checking Dr. Carson’s privilege: if we want underprivileged people to do better, one way to achieve this is a cultural shift to the right. Do I think we should do this? Irrelevant – it’s what privilege theory suggests, and that’s all I mean to do in this article: see another conclusion of privilege theory. Of course, this doesn’t mean there aren’t other ways to help underprivileged people – either governmental or voluntary. However, for people who actually care about helping the underprivileged, this is a strategy that can be put into action without relying on the power of government. As such, it might be much more realistic to implement – and increased effort on the margin would lead to greater marginal results.